I. Introduction
The main purposes of Competition Law are to ensure and protect a free market economy that is independent from any parameters and to prevent unfair competition between market players. In this framework, free market players/enterprises should comply with all the relevant laws when setting their prices, which is essential for legal compliance as well as authentic, independent and sustainable success in the market.
Thus, enterprises should avoid any violations of Competition Law and respect the legislation for any current or future risks and their management at the stage of pricing. This article will address the risks posed by different pricing methods and the relevant risk management strategies in the context of Competition Law.
II. What Does Pricing Entail Under Competition Law?
Competition law essentially aims to protect a free market economy by maintaining competition among market players/companies and preventing or eliminating actions and practices that may damage the final consumer through the disruption of competition. As such, pricing and the relevant strategies should be determined without distorting competition and market balance. Some of the parameters that function simultaneously in the determination of those strategies are as follows:
i. Price-Fixing Agreements between Enterprises: An enterprise’s primary market risk is a direct or indirect price-fixing agreement with competitors. These types of agreements are defined and prohibited as “concerted practices” under article 4 of Law no. 4054 on the Protection of Competition. Price-fixing agreements also distort competition and harm free market economies and consumers.
ii. Predatory Pricing: Another risk is an enterprise’s strategy to set its prices below cost to eliminate its competitors following free market principles. Although these types of pricing strategies may benefit consumers in the short term, they may create a monopoly in the long term, which will inevitably disadvantage consumers.
iii. Price Discrimination and Customer Segmentation: Price discrimination refers to an enterprise’s offer of different prices to different customer groups for the same goods or services. The term does not concern privileges granted to special customers or customers that enjoy long-term business/service relationships, but practices that would affect a free market economy in a way that would create unfair competition in respect of competition law. Therefore, market players should adopt uniform, rather than customer-specific, pricing systems.
III. Risks and Regulations
Given the volatility of the market economy, enterprises may face severe fines from the Competition Authority and other relevant authorities if they do not act strategically for their pricing risks and the prevention of those risks and their actions are deemed violations or anti-competitive practices under Law no. 4054 on the Protection of Competition.
Significant strategic responses and internal regulations are necessary to manage and eliminate such risks, which have clear legal limits.
a) Enterprises Should Develop Competition Compliance Programs Based on Their Activities in the Free Market.
Indeed, enterprises should develop pricing strategies based on internal policies and Competition Law principles, rather than their customers, and create and adopt Competition Law Compliance Programs as a company policy to minimize the existing risks for strategic planning.
In the context of compliance with Competition Law, awareness-raising activities, especially internal training, on penalties relating to the principles of Competition Law and the associated violations and on the establishment of relations with the actors involved in the Authority’s inspections will provide advantages in respect of competitors.
b) Internal Audit and Evaluation Mechanisms Should Be Adopted.
While the primary step is to establish internal pricing policies, it is still necessary to control their implementation at regular intervals. Indeed, only internal audits and controls can reveal how risks are managed and whether company policies are respected.
Thus, an internal audit mechanism identifies possible violations and shows how to draw a precautionary road map or how to adjust the existing company policy. This type of on-the-spot intervention ensures avoiding severe penalties of the Authority or managing the process to minimize them.
c) Legal Consultation on Specialized Matters and Internal Activities Regulation Are Necessary.
A pricing risk analysis requires special knowledge of the subject and entails various technical details. It takes a great deal of effort and expertise for an enterprise to apply Competition Law principles to its field of activity. Therefore, legal risk analyses must be performed effectively and on site to develop the right strategy with the right steps.
d) Pricing Strategies Should Be Straightforward.
The pricing policy of an enterprise, which is based on internal policies rather than customers, should be clear and straightforward. Thus, the enterprise will show that it complies with the principles of Competition Law and the principles of honesty and lawfulness in respect of the authorities, customers and, especially, other players of the free market while minimizing legal risks.
IV. Opinion
Competition Law promotes competition by aiming at an honest, transparent, equitable and fair balance between the free market economy and its players, which necessitates the adoption and thorough application of the fair and sustainable principles of the market economy by all enterprises.
Concerted practices and agreements prohibited by Law no. 4054, including price-fixing agreements, as well as price discrimination policies that aim to eliminate other market players constitute clear violations, and the Competition Authority may strictly impose severe and devastating sanctions on the enterprise involved in such violations.
For the management and handling of the relevant risks, enterprises should make accurate and appropriate risk-benefit analyses, perform regulatory controls to eliminate potential violations, implement internal Competition Law Compliance programs, regularly and sustainably, conduct on-site controls and audits of adherence to compliance processes to have legal protection for company reputation, internal financial structuring, and the achievement of a place with sustainable success in the free market in compliance with Competition Law and without any violations.
